Surcharge on Income Tax – Latest Rates. The surcharge is charged on the Income Tax and assessed if income is greater than Rs. 50 Lakhs for Individuals and more than Rs. 1 Crore for Companies. Different rates of Surcharge are applicable to different taxpayer categories and The current surcharge rates are as follows:
Individuals, HUF, Association of Persons, Body of Individuals, Artificial Judicial Persons
| Level of Income | Surcharge on Income Tax |
| A little less than the amount of. 50 Lakhs | Nil |
| Rs. 50 Lakhs to Rs. 1 Crore | 10% |
| Rs. 1 Crore to Rs. 2 Crores | 15% |
| Rs. 2 Crores to Rs. 5 Crores | 25% |
| More than 5 Crores of Rs. 5 Crores | 37% |
A 25% Surcharge as well as a 37% Surcharge will not be applicable in the following situations the following situations:
-
- Dividend Income
- The income taxable as short-term Capital Gains from the sale of shares/ mutual Funds in section 111A as well Long Time Capital Gains on Transfer of Shares or Mutual Funds under Section 112A.
Firms, Co-operative Societies and Local Authorities
| Level of Income | Surcharge on Income Tax |
| More than the amount of. 1 Crores | Nil |
| More than the amount of. 1 Crores | 12% |
Domestic Company
| Level of Income | Surcharge on Income Tax |
| A little less than the amount of. 1 Crores | Nil |
| Rs. 1 Crores to Rs. 10 Crores | 7% |
| More than the amount of. 10 Crores | 12% |
Foreign Company
| Level of Income | Surcharge on Income Tax |
| A little less than the amount of. 1 Crores | Nil |
| Rs. 1 Crores to Rs. 10 Crores | 2% |
| More than 10 Crores of. 10 Crores | 5% |
Note: rate of surcharge of Income Tax for foreign companies is lower than the Surcharges on Individuals since Domestic companies as well as Foreign companies are already charged an additional rate of income tax when compared to individuals. The rates of income tax are listed on this page – The Income Tax rates in India
Manner of Computation of Surcharge on Income Tax
After the calculation of the Income then the following step would be to determine the tax on income that will be imposed as per the following schedule
| Category of Taxpayer | Income Tax Rate |
| Individuals & HUF | As per Income Tax Slab Rates |
| Firms and Local Authorities | Flat 30% |
| Domestic Company with a turnover less than Rs. 250 Crore | Flat 25% |
| Domestic company – turnover of more than Rs. 250 Crore | Flat 30% |
| Foreign Company | Flat 40% |
It is important to remember that the Surcharge is levied for the complete tax income of the individual , and it isn’t a tax on amount of income of the person. The threshold for income over the amount of Rs. 50 Lakhs/ Rs. 1 Crore will only be used to verify whether the Surcharge is going to be imposed or not. Once the tax on income is calculated, the Surcharge would be levied to this taxes on income.
In order to calculate of income, the total tax-exempt income from all categories after deductions from Chapter VI A and Section 80C will be considered. Examples of deductions that are allowed under Chapter VI-A and Section 80C as of the date of filing income taxes are the following:
- PPF Account
- Tax Saving Fixed Deposit
- Tax Saving Mutual Funds
- Senior Citizen Savings Scheme
- National Savings Certificate
- Contribution to National Pension Scheme
- Contribution to Pension Funds
- Payment of Medical Insurance Premium
- Payment to treat a specific diseases
- Donations
The list above is only indicative and there are many other deductions that are permitted under Section 80C.
Examples of Levy of Surcharge on Income Tax
The following examples were designed assuming that the taxpayer is an individual and thus Income Tax Slab Rates apply.
| Particulars | Taxpayer A | Taxpayer B |
| Total Taxable Income | 47,00,000 | Rs. 53,00,000 |
| Total Tax to be paid in accordance
with Slabs of Income Tax |
12,22,500 | 14,02,500 |
| Applicability of Surcharge | No | Yes |
| Surcharge @ 10% | 1,40,250 | |
| Total Tax owed (incl Surcharge) | 12,22,500 | 15,42,750 |
| Edu Cess @ 2% & SHEC @ 1% | 36,675 | 46,282.50 |
| Total tax Payable (after Edu Cess & SHEC) | 12,59,175 | 15,89,033 |
Marginal Relief in the event of surcharge levy on Income Tax
To understand the concept behind Marginal Relief, we’ll present another instance.
| Particulars | Amount | Amount |
| Total Taxable Income | 50,00,000 | 51,00,000 |
| Taxes to be paid as per the Income Tax Slabs | 13,12,500 | 13,42,500 |
| Applicability of Surcharge | No | Yes |
| Surcharge @ 10% | 1,34,250 | |
| Total Tax owed (incl Surcharge) | 13,12,500 | 14,76,750 |
| Increase in Tax Liability (excl Cess)
due to Increase in Income |
1,64,250 |
In the previous example where the amount earned is the amount of Rs. 50 Lakhs the surcharge isn’t applicable. If the income grows by 1 Lakh to Rs. 1 Lakh to Rs. 51 Lakhs, Surcharge on Income Tax will be applicable.
While the income has only grown by one Lakh but the total tax due has been increased by 1,64,250 (i.e. 14,76,750- 13,12,500). Since the total increase in tax due is greater than actual income growth over the threshold of Rs. 50 Lakhs The notion of marginal relief could apply in this instance.
Marginal Relief is calculated in the following manner:
| Increase in Tax (excl Cess) | 1,64,250 (14,76,750 – 13,12,500) |
| (Less)Income above Rs. 50 Lakhs | 1,00,000 |
| Marginal Relief | 64,250 |
This marginal relief is subtracted from the tax surcharge for Income Tax, and it could look like:
| Particulars | Income: 50 Lakhs | Income: 51 Lakhs | |
| Total Taxable Income | 50,00,000 | 51,00,000 | |
| Total Tax to be paid according
to the Income Tax Slabs |
13,12,500 | 13,42,500 | |
| Applicability of Surcharge | No | Yes | |
| Surcharge @ 10% | 1,34,250 | ||
| (Less) Marginal Relief | 65,150 | 70,000 | |
| Total Tax owed (incl Surcharge) | 12,97,500 | 14,12,500 | |
| Edu Cess @2% and SHEC @ 1% | 39,375 | 42,375 | |
| Total Tax to be paid (incl Surcharge & Cess) | 13,51,875 | 14,54,875 |
Read More :-
- How to e filing income tax India 2022 | www.income tax.gov.in
- india income tax calculator
